Britain The country is likely to move towards a recession in the next one or two years amid rising inflation due to external shocks, economists at JPMorgan said on Friday. bank of england raised the cost of borrowing.
The BoE on Thursday raised its benchmark interest rate to 1.25% – the highest since January 2009. While its move was more gradual than those of other central banks, the BoE said it was prepared to act “coercively” if necessary to address threats from inflation.
“If (US Federal Reserve) there is a sharp slowdown or slowdown in the development of engineers, it will spread to the UK and combined with the tightening of domestic financial conditions could lead to a UK recession,” JPM said.
The Fed on Thursday launched its biggest rate hike since 1994 and flagged a slowing economy.
“…Given the nature of the UK economy, we see high vulnerability to external shocks beyond the near term and an increased likelihood of a recession over the next one to two years,” JPM said.
It said a recession would be more likely if British rates topped the long-term forecast of 3%.
Countries around the world are grappling with a standard of living not seen in decades as the global economy reopens after the COVID-19 pandemic and then the Russia-Ukraine war. The BoE expects inflation to rise to 11% in October.
However, JPM predicts that British banks will remain profitable and mortgage defaults to remain below the peak of previous recessions even with high interest rates, hoping that the initial impact on borrowers will be manageable over the next 12 months.
Earlier in June, the British government said it would launch a comprehensive review of the mortgage market, months after a BoE survey showed lenders expected loan defaults to rise.
The BoE on Thursday raised its benchmark interest rate to 1.25% – the highest since January 2009. While its move was more gradual than those of other central banks, the BoE said it was prepared to act “coercively” if necessary to address threats from inflation.
“If (US Federal Reserve) there is a sharp slowdown or slowdown in the development of engineers, it will spread to the UK and combined with the tightening of domestic financial conditions could lead to a UK recession,” JPM said.
The Fed on Thursday launched its biggest rate hike since 1994 and flagged a slowing economy.
“…Given the nature of the UK economy, we see high vulnerability to external shocks beyond the near term and an increased likelihood of a recession over the next one to two years,” JPM said.
It said a recession would be more likely if British rates topped the long-term forecast of 3%.
Countries around the world are grappling with a standard of living not seen in decades as the global economy reopens after the COVID-19 pandemic and then the Russia-Ukraine war. The BoE expects inflation to rise to 11% in October.
However, JPM predicts that British banks will remain profitable and mortgage defaults to remain below the peak of previous recessions even with high interest rates, hoping that the initial impact on borrowers will be manageable over the next 12 months.
Earlier in June, the British government said it would launch a comprehensive review of the mortgage market, months after a BoE survey showed lenders expected loan defaults to rise.